Although the state Senate recently voted for the first update in 50 years that expands the personal property protected from seizure in bankruptcy proceedings, consumer advocates in the end weren’t cheering.

David McMillan, an attorney with Legal Services of New Jersey, said S2423 in its original form “was a bill of historic proportions” that would have changed New Jersey’s exemption law and solved problems that have long plagued low-income state residents.

But the reach of the bill was scaled back considerably. A proposed homestead exemption for couples was cut in half, to $340,000. Crucially, McMillan said, state court judgments were removed from the bill, which limited its real-world usefulness given that most bankruptcies are handled in federal court.

“A severe rollback of the protections that the bill originally provided, to the point where it really is not a shadow of its former self,” McMillan said.

Beverly Brown Ruggia, financial justice organizer for New Jersey Citizen Action, said New Jersey ranks among the four worst states for exemption laws. She said the law is outdated “more than a hundred years” and that the bill in its original form moved New Jersey’s exemptions into the 21st century.

“We are not talking about free rides away from debt obligations,” Ruggia said. “We are talking about making sure people are not destitute and put in the street.”

The bill is among the scores taken up by the Legislature in response to the coronavirus pandemic and its economic fallout. Ruggia said enhanced protections from debt collectors were needed before the COVID crisis but are especially urgent now.

“These are the very kinds of provisions we need to put in place so that people can get back on their feet, that they have a fighting chance of financial recovery,” she said.

McMillin said he knows of no other state that limits exemptions only to people who seek bankruptcy protection but carves out state court judgments.

“We’re really terribly concerned about this. It’s not the bill that it was,” McMillan said. “It would do so much less.”

Bill sponsor Sen. Nellie Pou, D-Passaic, said new legislation that addresses non-bankruptcy debt collections will be introduced separately.

In addition to the $340,000 homestead exemption, the bill would also allow people to retain up to $5,000 in a personal bank account, up from the current $1,000 and increase the value of personal property exempt from being sold in bankruptcy proceedings to $10,000, up from the current $1,000. Those numbers would be adjusted for inflation every three years, Additionally, all household goods and federal COVID-19 payments would be exempt from seizure.

“Bankruptcy is almost always a last resort,” Pou said. “Families going through this process are dangerously vulnerable and without strong representation can be left with next to nothing. This bill will help ensure that even after bankruptcy, folks will have the means to rebuild what they have lost and not have to fear homelessness or hunger for their family.”

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The Senate passed the bill 38-0 on June 29. There is no Assembly version of the bankruptcy bill, which now awaits consideration in the Assembly Judiciary Committee.

It is possible, though rate, for a bill to advance even if the only version that exists originated in the other side of the Legislature.

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Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at

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